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Published August 10, 2010, 08:28 AM

Wheat rally supports markets

The wheat market gained significant ground early in the week, but traded in a topping fashion Aug. 6.

By: Ray Grabanski, Special to Agweek

Wheat

The wheat market gained significant ground early in the week, but traded in a topping fashion Aug. 6. For the week, September Minneapolis gained 35.25 cents, September Chicago gained 64.25 cents and Kansas City September added 45.5 cents. The gains were a lot more impressive up to Aug. 5 as wheat traded limit down Aug. 6.

Wheat started the week sharply higher with most of the strength coming from continued concerns toward world wheat production. Wheat has been rallying sharply higher the past few weeks with most of the support coming from the drought in Russia and Europe as well as from concerns toward production in Canada. This has resulted in the funds wanting to be long wheat, and that has turned the wheat market into a money game.

The Aug. 3 session had wheat open lower. By midsession, wheat tried to stage a slight recovery, but the best wheat could muster was a loss of 5 to 7 cents. After trading to 23-month highs, a little setback is not out of line.

The Aug. 4 session had wheat sharply higher, reclaiming the title as market leader. The push was enough to put wheat up against resistance levels and at the highest levels since September of 2008. In all, wheat has rallied close to 71 percent from its June low. The rally already is causing concerns in the food sector as millers already are starting to show concerns as to the cost of wheat and its influence on the cost of bread.

Wheat started the Aug. 5 session limit up with most of the push coming in the four months of each of the exchanges. The early strength was a result of reports from Russia that the country will halt exports of wheat for the rest of the year beginning Aug. 15. Russia exports about 17.5 million metric tons per year and is considered to be sixth in ranking for world wheat exports. In all, the fundamental picture does not support wheat prices at the level they are at, but the money is flowing into the wheat, and that is the driving force.

USDA estimated last week’s wheat export shipments pace at 22 million bushels. This brings the year-to-date export shipments pace for wheat to 148.2 million bushels compared with 117.1 million bushels for this time last year. Last week’s wheat export sales pace was estimated at 31.4 million bushels. This brings the year-to-date export sales total for wheat to 339.9 million bushels compared with 251.4 million bushels for last year at this time. USDA is estimating wheat’s export pace for the year at 1 billion bushels.

Corn

The corn market ended the week up 10 cents. The wheat market gave direction to the corn market early this week, as both commodities are used for feed. There is no fresh news for the corn market to trade and it has been content to follow the wheat market. Aug. 6 was an interesting day as the wheat market was limit down and corn was able to trade close to unchanged. Private firms are releasing their estimates for next week’s report and are coming in higher than last month’s USDA report. The next major report from USDA will be the crop production report Aug. 12.

To start the week, the corn market opened 9 to 10 cents higher, but came back to close the day 2.25 cents lower. The market opened higher with the higher overnight session and the strength in the wheat complex. The outside markets also were very positive and supportive for the open. The market did start to break down at midsession with the break in the wheat market. The wheat was able to firm backup, but the corn could not follow. The fundamentals for corn remain weak and that limits corn’s ability to support a higher market.

The corn market opened 2 to 3 cents lower Aug. 3 and ended the day down 1 cent. The market traded mostly lower for the entire session. The overnight market was lower and that carried over to start the day. In addition, follow-through selling with Aug. 2’s downside reversal pressured the open. After the open, the wheat market traded with double-digit losses, and that added additional pressure to the corn market.

The corn market opened 6 to 7 cents higher Aug. 4 and traded with positive numbers for the session, ending the day up 10.75 cents. The market was higher overnight, and that supported the open. But the majority of the strength was from the wheat trade. The wheat market made 22 month highs and that pushed corn higher. Both commodities are used for feed and the strength in the wheat market has traders thinking demand will increase for corn. Fund buying also supported the market higher, as the outside markets were neutral and had little effect.

The corn market opened 22 to 23 cents higher and at seven-month highs, but could not hold on to the highs of the day and end up 3.25 cents. The strength in the wheat market supported the open. Wheat came off of its limit high open within the first 15 minutes of trading and corn quickly gave back half of its gains. Corn traded 6 to 10 cents higher for most of the session, but moved lower into the close. The outside markets had little influence, but the export sales report was bullish to add support.

USDA’s export inspection report was seen as bearish for corn. There were 31.5 million bushels of corn reported shipped and that was below the 59.5 million bushels needed to meet USDA’s projection of 1.95 billion bushels for 2009 to ’10. This was slightly below the pre-report estimates of 38 million to 41 million bushels.

Soybeans

The soybean market struggled for the first part of the week but gained steam toward the end of the week. For the week, August soybeans gained 6.5 cents while November new crop improved by 28.5 cents.

Soybean’s started the week sharply higher with most of the early support spilling over from the wheat exchanges. Wheat continues to be the main focus of traders’ attentions, but the other grains are trying to keep pace. Adding some support was concerns that the past two weeks of weather might have trimmed crop potential. This is the critical time frame for soybean crop development as the crop is setting pods and pod filling.

The Aug. 3 session had soybeans opening with modest losses as profit taking and technical pressure stepped in to pressure the soybean market. Early selling also was encouraged by spillover selling from a lower wheat market. But the selling pressure was short lived as once soybeans traded down to the physiological $10 level, buy stops stepped in to help soybeans to recover and trade with small gains. Traders are reluctant to push the soybean market below the $10 level as now is the most critical time frame for soybean crop development.

Soybeans started the Aug. 4 session higher with most of the early strength spilling over from a sharply higher wheat complex. Soybeans were able to hold onto session gains, but traded sloppy throughout most of the day, holding 5- to 7-cent gains for most of the session. Light support was from concerns that the recent hot weather in the Delta region has caused production losses.

The Aug. 5 session had the soybean market open sharply higher with most of the early session strength spilling over from a sharply higher to limit up opening in the wheat market. Wheat continues to be supported by Russian issues as it seems every day brings another new wrinkle. The buying frenzy was enough to push soybeans to highs not seen since December. But once the initial buying frenzy had run its course, soybeans slipped off of their highs. In the end, the soybean market was able to hold onto small gains mainly because of continued strong demand for soybean exports.

Barley

USDA estimated last week’s export shipments pace at 16,000 bushels with all of the bushels going to Mexico. USDA reported no barley sales for last week. This brings the year-to-date export sales pace for barley to 800,000 bushels compared with 1.5 million bushels for last year at this time.

As of Aug. 1, barley heading was estimated at 97 percent compared with 90 percent for last week and 98 percent for the five-year average. Barley’s crop condition rating remained steady at 86 percent good/excellent, 10 percent fair and 4 percent poor/very poor.

Cash feed barley bids in Minneapolis improved to $2.50. Malting barley bids remain off the board.

Durum

USDA estimated last week’s durum export shipments pace at 419,000 bushels with all of the bushels heading to Germany. USDA reported last week’s durum export sales pace at a negative 1.1 million bushels (cancellation). This brings the year-to-date export sales pace for durum to 14.8 million bushels compared with 11.2 million bushels for last year at this time.

As of Aug. 1, 16 percent of North Dakota’s durum crop was turning compared with 3 percent last week and 48 percent for the five-year average. Durum’s crop condition rating is at 89 percent good/excellent and 10 percent fair and 1 percent poor/very poor.

Canola

Canola futures on the Winnipeg, Manitoba, futures closed the week ending Aug. 4 with close to $10 (Canadian) gains. The canola market traded higher early in the week as traders were trying to bring the canola market closer in line with the other world vegetable oil markets that traded Aug. 2 (Winnipeg was closed Aug. 2). Additional strength was a result of support from news of new export demand from Mexico and China. Light strength also was a result of spillover strength from a stronger U.S. soybean complex. A weaker Canadian dollar helped to add to the session’s strength.

Cash canola bids in Velva, N.D., for old crop canola were $19.68 Aug. 5, while new crop bids were $19.49.

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